The tax rate cut is said to offer up to 720,000 small businesses (those with under $2m turnover) a two-year head start on other companies. ProPrint‘s recent Industry Report found that around 58% of readers had a turnover of less than $2.5m.
However, there will be no immediate boost for small business – the cut, from 30% to 28%, will only take effect from July 2012.
The corporate tax rate for the biggest companies is set to fall from 30% to 29% in 2013-2014, and down to 28% from 2014-2015.
Meanwhile, the government expects that continued economic growth will translate to an uplift in company tax receipts, set to swell to $66.5bn by next year and help the nation get back in the black.
Treasurer Wayne Swan said the country should return to surplus by 2012-13, three years ahead of forecast.
The mining sector was the biggest loser in yesterday’s budget, with the 40% Resource Super Profits tax to come into force from July 2012.
Swan said in his budget speech: “Taxing mining super profits fairly means we can afford to cut the company tax rate to 29% in 2013-2014 and 28% in 2014-2015.
“From 2012-2013, small businesses will receive a head start on the 28% company tax rate. They will enjoy an instant write-off for assets costing less than $5,000.”
Focus Press managing director David Fuller told ProPrint that although a cut in the tax rate was welcome, the two-year head start was little help in a market dominated by big companies not turning a profit.
“My first reaction was that it’s good to drop the tax rate. Hopefully some people will make some money and take advantage of that.
“But 50% of the whole industry is dominated by two companies who aren’t even capable of turning a profit,” he said.
“If we had major competitors who were making profits, it might be good to get an advantage over massive companies,” added Fuller.
However, Fuller said that when “competing against monoliths”, small businesses needed any help they could get.
Vega Press commercial director Rob Nugent told ProPrint he didn’t think the budget addressed the needs of SMEs.
“There’s a good chance interest rates will continue to rise, which will be harmful for small businesses in the printing industry,” said Nugent.
In a Budget 2010 wishlist written last week, Nugent said: “There are more than 500,000 businesses in Victoria and 95% of those have fewer than 20 employees.
“The government should take steps to ease the financial burden on these businesses as most are still recovering from the GFC,” added Nugent.
“Small businesses need relief on finance charges. Access to capital has become increasingly difficult since the GFC and the cost of funds on standard business borrowing products has increased by nearly 5%.”
Hagop Tchamkertenian, national manager for Policy and Government Affairs at Printing Industries, said the budget was “reasonable” for print.
“But like all budgets there is both good news and bad news,” he added
“The reduction in the company tax rate is also a welcome measure,” he said. “Since the bulk of the printing industry comprises small businesses , this measure is beneficial.”
Tchamkertenian added: “The association remains disappointed that the Federal Government did not announce that it was removing the 5% tariff on imported paper following PaperlinX’s decision to exit local manufacturing.”
Canberra has also been selling the small business benefit of changes to asset deductions. The budget makes immediate allowances for small business to write-off assets under $5,000.
Tchamkertenian said: “Instant asset write-off for assets less than $5,000 for small business from 1 July 2012 should help cashflow. Simpler depreciation arrangements are also a welcome measure. “
Fuller said that although print companies were balance sheet-driven that asset deductions should be helpful, $5,000 was too low to have any real impact.
Another initiative that could have an effect on printers is a tightening on GST compliance.
The budget expects a $1.1bn gain to come from more vigorously policing GST compliance among businesses.
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